We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Authorities finally take action in 21-year corruption case

In April 1998 the Ministry of Petroleum's Department of Petroleum Resources allocated Malabu Oil and Gas Limited two oil prospecting licences (OPLs) (for further details please see "Italian corruption case continues – will authorities ever investigate wrongdoing?"). One of these, OPL 245, appeared to cover significant volumes of crude oil and gas. Malabu had been incorporated barely one week before it received the allocations. This appears to have occurred because the then minister of petroleum and one of General Abacha's sons, Mohammed Abacha, had major beneficial interests in the company.

Two months later, General Abacha died. He was succeeded by General Abdulsalaam Abubakar, who immediately started the process that saw the restoration of an elected civilian government on 29 May 1999, headed by former military head of state Olusegun Obasanjo. Obasanjo's government reversed many actions taken by the Abacha government, but not the allocation of OPL 245 to Malabu. This was despite the fact that only $2 million of the $20 million signature bonus (a condition for granting the OPL) had been paid. In March 2000, confident that OPL 245 would not be revoked, Malabu made arrangements with Shell Nigeria Ultra Deep Limited (SNUD) – a special purpose vehicle owned by Shell Petroleum Development Company Nigeria Limited (SPDC) – to assign a 40% participating interest in OPL 245 to SNUD. However, in July 2001 the allocation of OPL 245 to Malabu was revoked and the arrangement with SNUD came to nothing. In May 2002, after having received bids, the federal government awarded OPL 245 to SNUD.

Malabu sued the federal government. In November 2006 it settled the action and OPL 245 was restored to it. This resolution came regardless of the fact that the Nigeria National Petroleum Corporation had entered into a production sharing contract with SNUD.

Deprived of OPL 245, SNUD instituted arbitration proceedings against the government before the International Centre for the Settlement of Investment Disputes. In the midst of this, between 2006 and 2011, former Petroleum Minister Dan Etete, who controlled Malabu after having ousted Mohammed Abacha, sought to monetise an asset that he was unqualified to hold. However, no qualified party was willing to engage directly with Etete due to the fact that he had been convicted of money laundering (subsequently reversed on appeal) in France. As such, Etete sought the assistance of intermediaries to negotiate with potential purchasers on his behalf. One such intermediary was BVI-registered company Energy Ventures Partners. It subsequently transpired that the Nigerian government – through Attorney General Mohammed Bello Adoke – had also been involved in negotiations to make a valuable Nigerian asset productive. Adoke subsequently reported that a resolution agreement relating to the OPL 245 disputes had been reached between the following entities:

Under this arrangement, Malabu surrendered OPL 245 to the federal government. In turn, the federal government allocated it to Shell Exploration and Production Company Limited and Nigerian Agip Exploration Limited, which each had to contribute $500 million to an escrow account with JP Morgan Chase. This account had already been established and held $207 million, representing a signature bonus which was due to the federal government in respect of OPL 245. Adoke claimed that, despite the fact that OPL 245 had been surrendered to the federal government, the government had no interest in it and was acting only as a facilitator of the settlement. It followed that none of the escrow funds, including the signature bonus, belonged to the federal government. When they were eventually paid out, the bulk ($800 million) was paid into Malabu's accounts with two Nigerian banks on instructions from Nigerian officials who were signatories to the account.

Italian investigation

Unfortunately for all concerned, a Milan prosecutor commenced an investigation into the entire transaction, alleging that it was a cover up for the distribution of bribes to Nigerian government officials by Eni and Shell executives. At the conclusion of the investigation, corruption charges were laid against Shell and Eni, as well as former and current executives of both companies. Nigerian national Obi and Italian national Gianluca Di Nardo were also charged. All of the defendants denied any wrongdoing. Obi and Di Nardo opted to be tried by a fast-track procedure which was available in Italy and on 20 September 2018 they were reported to have been convicted of international corruption. They were both sentenced to four years' imprisonment. In addition:

Obi was ordered to forfeit $98.4 million of his assets which were frozen in Italy (possibly part of the $100 million verdict secured by Energy Ventures Partners in its London action against Malabu); and

Di Nardo was ordered to forfeit Sfr21 million.

Neither Di Nardo nor Obi were in court and both remain free pending anticipated appeals. Testimony in the case against the other defendants continues, with all denying any wrongdoing.

Recent developments

After years of inaction and many questions as to why the Nigerian authorities have done nothing to pursue Nigerian wrongdoers – other than taking civil action in England against JP Morgan Chase in respect of the payments from the escrow account and against Shell and ENI companies with regard to the resolution agreement – it appears that the Nigerian authorities have finally decided to pursue criminal proceedings against Nigerian parties. On 16 April 2019 the Abuja High Court issued orders for the arrest of Etete and Adoke, as well as four other non-Nigerians. According to a media statement by the Economic and Financial Crimes Commission, in 2017 it brought charges against Etete and Adoke, as well as:

Shell Nigeria Exploration Production Co Ltd;

Nigeria Agip Exploration Limited;

Malabu;

Eni Spa;

Raph Wetzels;

Casula Roberto;

Pujato Stefeno;

Burrato Sebastiano; and

Aliyu Abubakar.

The commission's statement claimed that as the defendants had repeatedly failed to appear before the court, it had obtained warrants for their arrest. Further, the statement indicated that the commission would request Interpol to issue requests to law enforcement agencies worldwide for the provisional arrest of the defendants, pending extradition, surrender or similar legal action. Commentators consider this to be a good development and are watching to see whether there will be any further material developments. According to reports, both Etete and Adoke are in Europe, so it should not be hard to point the appropriate law enforcement agencies in their direction.

Within days of the court order, all of the defendants against whom orders for arrest had been made were reported to have applied to discharge the order against them. The court has yet to consider these applications.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide.Register for a free subscription.